How Identity Has Become The ‘Linchpin’ Of The Digital Economy

Not so long ago, identity wasn’t really an area of concern in the financial services ecosystem, or the economy at large. Fast-forward a decade and several thousand data breaches later, and these identity abuses have had a profoundly persuasive effect on the industry when it comes to ensuring that the person on the other side of the screen is actually who they say they are. In fact, Jumio’s Chief of Digital Identity Philipp Pointner told PYMNTS that the industry has both matured and been pushed by the necessities of the moment.

“Identity has become front and center of many considerations,” he noted. “It has received yet another boost of importance through the pandemic, and it is the linchpin toward a better digital economy.”

It’s a mind shift that Pointner said was readily observable in the $4.5 billion IPO that biometric screening firm CLEAR pulled off a few weeks ago, which reflected the unprecedented demand for ID verification after 18 months of pandemic-related digitization.

And while that has been both a remarkable opportunity and a great leap forward, Pointner said it has also brought new challenges, particularly when it comes to customers’ data security. That shift meant that the ability to properly verify the identity of the person on the other end of the screen quickly became critical for every firm looking to play in the digital economy.

“When you start transacting with somebody — when opening an account or also on an ongoing basis — it becomes more important than ever to know the identity of the other person in front of the screen,” said Pointner.

The Change In How Identity Gets Done

The state of the art is moving away from what Pointner called the older model of established identity that used specific pieces of data — such as Social Security numbers, addresses, names and birthdates — to confirm who is who.

“I think everybody now understands that all the data you want is out there,” he said. “The fraudster who wants to open a false account isn’t trying to impersonate someone specific — they just want to impersonate anybody who’s not them. And so any complete data record that is out there would meet that need.”

Moving in to replace all of that easily compromised data, he noted, is a more “document-centric” method of authenticating one’s identity, wherein those documents are cryptographically stored, making them essentially useless to fraudsters. Additionally, it gives consumers an easier, more convenient method to sign in, instead of having to constantly key in the same data over and over again.

The best way to counter data breaches, said Pointner, is to find a better standard by which to authenticate consumers that is less susceptible to compromise.

The Path Forward

As for what comes next, Pointner said that while there are no crystal balls, it seems likely that we’ll see an expansion of advanced identity authentication tools across the web — and in places where we have not previously expected to see them. Once it becomes ubiquitous and everyone has a digital identity available on their phones or computers, he predicts that many more sites and service providers will ask for identity.

They aren’t doing it now, he noted — not because it isn’t beneficial, but because they are afraid of introducing friction into their processes, and because they don’t like the economics behind it.

But that is changing, said Pointner — the lower cost of accessing the technology, the increasingly united force of global regulators regarding consumers’ ownership of their data, and the reality that locking down consumer identities also serves to lock out fraudsters.

“There’s so much going on digital identity; it is such a hot space at the moment,” he noted. “I think the signs clearly point to this becoming mainstream.”